Audit: FSDB land purchases are flawed
By PETER GUINTA
Assignment Editor
Publication Date: 08/31/03
In purchasing 11 private homes on Alfred and Genoply streets, Florida School for the Deaf and the Blind broke state property acquisition laws, state auditors say.
But FSDB officials said all the real estate transactions in question were approved in advance by the state.
Information for the audit was obtained from school records covering July 1, 2000, to Dec. 31, 2001, as well as some dates in 2002.
The Auditor General's report was released in December 2002, but only came to public light after FSDB sought to rezone some of its parcels.
The audit adds a complicating factor to FSDB's rezoning plans because the school's neighbors in Nelmar Terrace have vowed to fight its expansion.
On Tuesday, the school will ask city Planning and Zoning Board members to approve a planned unit development on the 2.33 acres making up the Alfred and Genoply block.
If that request is granted, nine houses on that block will be demolished or moved, and FSDB's Board of Trustees intends to spend $5.4 million to build four independent living dormitories on the property. They voted unanimously on Saturday to do so.
Each two-story, independent living structure would have a 3,000-square-foot footprint and will house 12 disabled students, ages 18 to 22.
Attorney Tracy Upchurch, representing the school, said FSDB already is permitted to build independent living homes in a commercial zoned section of the block along San Marco.
"A planned unit development is a negotiated type of zoning," he said, explaining that it allows Zoning Board suggestions to be put into the final project. "We felt we were doing a good thing by offering that."
The audit said FSDB paid too much for the 11 Alfred and Genoply properties, spending a total of $2.2 million -- more than $800,000 more than its initial $1.3 million estimate of the cost.
School officials responded to that last week by saying that land prices rose during the six years since FSDB began acquiring those properties.
William Proctor, former chairman of the Board of Trustees and a member of the state Board of Education, said the school cleared all land purchases with the Internal Improvement Trust Fund, a state board that monitors land acquisitions by state agencies.
"If the trust gave us misdirection, and I'm not sure they did, ... (FSDB President Elmer Dillingham) followed what the trust told him to do," Proctor said. "As soon as it becomes public knowledge that the school wants a piece of property, cost estimates go right out the window."
Proctor is also chancellor of Flagler College, which is a private school in St. Augustine.
Dillingham said FSDB had established processes covering land acquisitions.
"They first are approved by the Board of Trustees, then fit into our facilities master plan, sent to the Department of Education, and then the Legislature is asked for the money," he said. "That's just the legal scenario. We followed the process the state laid out. They approved every acquisition that was made."
Under pressure
Proctor said FSDB is trying to comply with a federal and state mandate to house older students until they graduate or reach age 22, whichever comes first.
"That mandate takes precedence over what a five-year-old master plan says," he said.
The alternative, school officials said, is housing students in their early 20s in dormitories with elementary school-age children.
Proctor dismissed the idea of satellite campuses around the state.
"You have to have a critical mass of faculty, staff and equipment, whether it is one student or 100 students," he said. "The question is: Do we want a good school or a poor one?"
The audit contains written responses by Dillingham to all noted deficiencies, but Joe Williams of the Auditor General's Office, who oversaw the audit, said most of those responses are off the point.
"The school never gave direct, to-the-point or matter of fact representations," Williams said. "The school thinks it can operate as if it's a private school, spending private money. But it's an agency of state government, responsible to all the state requirements."
The school disputes that it has been off point.
Mary Jane Dillon, newly elected board chair, said the board examined and "exhaustively discussed" the audit.
"There is confusion over the legal classification of the school and over which statutes apply. We're an anomaly," Dillon said.
That disagreement is at the heart of the school's approach to the audit. Dillingham's written response said essentially what he said in a personal interview this week: "The auditor's findings do not appear to be of merit ... If for any reason during the process of purchase, the ... (trust) did not approve the procedures employed by the school, the purchase could have been disproved and the purchase halted."
Proctor said Florida Statute 1002.36(4)(D) calls the board a "body corporate," and that it does not sit as a School District or School Board.
"We are a single entity, unlike anyone else. If you read Florida Statutes, you get different interpretations," he said.
The auditor, however, said FSDB is identified as a School Board by state law. As such, it must seek appraisals for property in advance of buying it, something it did not do with the Alfred and Genoply blocks.
State law also requires an appraisal of a property in advance of purchase, if the cost is more than $500,000.
A neighborhood fight
The audit says the school had 10 properties appraised only after it had completed negotiations and entered into contracts.
One homeowner is James P. Register, 15 Genoply St., the only resident still living on that block.
Register's house was appraised at $60,000, but he was told it had a market value of $98,800. FSDB offered him $165,000. All transactions on the block were handled by Tom Costeira, a real estate broker with Century 21.
Register resisted selling for a while, then agreed so he could build a new house next to his father's. A contract for sale was signed, but then a title glitch kept the closing from happening, he said.
"This thing has been going on for two years," Register said. "They came and left me a tray of chocolate chip cookies and a note saying it was hard to get in touch with me. But I'm right here, every day."
He learned FSDB had offered $200,000 to the owner of a vacant lot next to his house.
"They gave me a bad deal," he said. When the time limit for his contract expired, he upped his price to $200,000.
He said he hasn't heard anything from the school since.
"I don't think it's my job to run up and down the street, trying to talk to them," he said. "I'm very disenchanted."
The Nelmar Terrace residents are behind him.
Melinda Rakoncay, president of the 45-member Nelmar Terrace Neighborhood Association, said the school tried to encroach into that neighborhood in 1983, when it wanted to build a multi-handicapped facility at Milton and Magnolia streets. But the neighborhood resisted -- and won.
Rakoncay said they knew that once pieces of a neighborhood are rezoned, there would be no grounds to prevent future rezonings.
About the new development, she says, "I wish the school followed the zoning and planning procedures they were directed to follow 20 years ago."
More discrepancies
In addition to the other deficiencies listed in the audit, FSDB might also have double-billed the Legislature for properties.
"The school received $210,000 for one property in the 2000 appropriation, and $220,024 for that same property in the 2002 appropriation," the audit said. "For the other four properties, the school received $232,248 in 2000, and $530,000 in the 2002 appropriation."
All the land purchases were brokered by Costeira, who said he provided market value estimates to both the property owners and the school.
"The whole process started with me sending homeowners a letter," Costeira said. "I told them, 'Give me a call.' Then, I met with the ones who called me."
FSDB made each interested homeowner an offer, he said. Sometimes there were counter-offers and he took those back to the school for consideration. Costeira also handled the sale of the condemned Azalea Court Motel, 205 San Marco Ave., in 1998 for $210,000.
The motel was leveled six months later. Proctor said it was a security issue and eyesore.
"Nobody can say that the neighborhood's property values haven't improved with it gone," he said.
According to Rakoncay, acquisitions on the Alfred and Genoply block began in 2000.
The house at 2 Alfred was sold for $78,000, 4 Alfred for $220,000, 8 Alfred for $130,000, 10 Alfred for $110,000, and 12 Alfred for $145,000, she said. The house at 11 Genoply was bought for $200,000 and 13 Genoply for $130,000. The purple carpet barn on San Marco Avenue sold for $350,000.
Costeira said that when a property went under contract, those contracts went to Tallahassee to be approved.
"I offered them what they told me to offer them. They were not different from any other real estate transaction," he said.
A different school
Proctor said student per capita costs -- many times higher than at other schools -- don't apply at FSDB because the school teaches 750 deaf, blind and special education children. About 120 of those have multiple handicaps.
"North Carolina has three schools for the deaf and blind. None compare to this one. We have what well may be the best school of its type in the world," Proctor said.
Upchurch said serving this population of students is very expensive.
"We clearly have an obligation to serve those students," he said of the new mandate. "There is a certain cost to acquiring the property, but it will serve students in perpetuity at that location."
School statistics show that of the 89 graduates in 2002, 62 percent planned to attend college, 27 percent planned vocational or technical training and 11 percent had immediate job plans.
Upchurch said this latest controversy between the city and school is like the Lightner Parking Garage or National Guard's expansion issues.
"St. Augustine is unique in that we have large institutions and a very small community," he said. "Those are going to bump into one another. But if we don't have those institutions, we'd be no different than any small town in Florida. They bring jobs, education and dynamic folks here."
Proctor said the "harsh reality" is that FSDB was there before most of its neighbors.
However, a 1917 Sanborn map of that neighborhood show 11 structures on the Alfred and Genoply block. The school's buildings sit well east of Douglas Avenue.
"There are people living in that neighborhood who never had a problem with the school," Proctor said.
Rakoncay agrees that the school is a special institution and its work and mission are valuable. She just doesn't want it gobbling her neighborhood.
"We're not just a few nut cases over here," she said. "We circulated a petition and got more than 50 signatures, representing 43 of the 45 households."
Interlocal agreement
The audit said FSDB did not coordinate its expansion plans with St. Augustine's comprehensive plan, did not tell city officials it wanted to close nearby streets, and did not inform adjacent neighborhoods of its expansion intentions.
The auditor recommended that the school "establish procedures to ensure its compliance with state laws and rules dealing with the appraisal and purchase of real estate."
Williams said the audit was an especially difficult one to perform, given the school's unilateral behavior.
"An audit report is essentially a picture that the regulatory people, Legislature and management can use to implement change," he said. "If no one chooses to change anything, there's nothing in the report to make them do that."
Upchurch said the legality of the school signing an interlocal agreement with the city is "far from clear. The auditor and the Attorney General are the only two people in state government who have reached that conclusion."
He said the city and school need better communication.
"The question is: At what point do these properties become part of the campus? That is one of the murky legal issues we are trying to work our way through," he said.
Proctor said the bottom line is that there was no "material, substantial" problem in procurement of the land.
"(This audit) will not materially change what the school does or doesn't do," he said. "The neighborhood doesn't have responsibility for the education and safety of those students. The board does."
Historic area
Houses on Alfred and Genoply streets are mostly wood frame and all but one were built between 1910 and 1917.
The master site file of the Historic St. Augustine Preservation Board said the eastern portion of the neighborhood sits on the site of an 18th century Indian village and a British period homestead.
The area evolved from three late 18th century Spanish land grants. Juan Gianopoly, a Greek carpenter and builder of a house at 14 St. George St., used the land as a dairy farm.
The northern section was sold in 1850 to Thomas Douglas, a Florida Supreme Court justice who incorporated the land into his plantation.
The area was further subdivided in 1868, and FSDB was founded in 1885 with three adjacent Victorian homes as its first campus. Those buildings have long been replaced by more modern structures.
The oldest house on the Alfred and Genoply block stands at 4 Alfred St. It was constructed between 1894 and 1899, and reportedly was Justice Douglas' home.
David Nolan, author of "The Houses of St. Augustine," said the neighborhood developed between 1910 and 1917 because the city built a trolley line along San Marco Avenue.
"That made it feasible to live up there and work downtown," Nolan said. "FSDB was considered 'out of town' when it started."
After World War I, there was a building slump, he said. But after the war, the great Florida land boom of the 1920s began and the area flourished once more.
"I lived there 20 years ago," Nolan said. "My kids grew up there. It was a great neighborhood. If you want to destroy a neighborhood, take enough buildings down so anything adjacent to it becomes undesirable. Nobody's going to want to live next to that, and that has a rolling effect in the neighborhood."
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